Today the Commerce Department's Bureau of the Census released its report entitled Advance Data on Large Retailers' Profits for the First Quarter 1996. The data for this report came from the quarterly financial reports of 554 large retailing corporations with assets over $50 million.

Any way you look at it, the advance estimate of profits for the first quarter of 1996 was not as good as the performance logged in the fourth quarter of 1995 or the first quarter a year ago.

After-tax profits averaged 1.2 cents per dollar of sales for the first quarter of 1996, down 0.6 (+/-0.15) cents from the preceding quarter, and down 0.3 (+/-0.15) cents from the same quarter in 1995.

After-tax profits in the first quarter were $2.8 billion, down $1.8 (+/-0.2) billion from the preceding quarter, and down $0.4 (+/-0.2) billion from the same quarter a year ago.

In the first quarter the annuallized rate of after-tax return on stockholders' equity was 7.4 percent, compared to 12.0 percent in the fourth quarter of 1995, and 8.7 percent in the first quarter of 1995.

First quarter 1996 sales were $225.3 billion, down 34.9 billion or 13.4 (+/-1.3) percent from preceding quarter. However, First quarter sales compared to the same quarter a year ago were up $16.9 billion or 8.1 (+/-2.0) percent.

The unfavorable comparisons between the first quarter and the fourth quarter are all the more dramatic considering that the fourth quarter was one of the worst experienced by the retail sector in several years. Same store sales for the nation's retailers in December rose by just 1.7 percent -- the smallest increase in 10 years. But, while this is all very interesting, it is also pretty much ancient history. Nearly 3 1/2 months have passed since the end of the first quarter.

Based on various recent reports of economic activity, we might suspect that profits in the retail sector will grow faster in the second quarter than they did in the first. But, the second quarter 1996 advance data are not scheduled for release until September 13, 1996. Obviously, we have to look to other data, like the four indicators that make up the Composite Index of Coincident Economic Indicators, to obtain a more-timely assessment of the present status of the economy.

Its been awhile since I completely explained the meaning of the (+/-) numbers that sometimes appear with the statistics reported in the government economic press releases. Today's Retailers' Profits report contained such an explanation. So, I'm enclosing it here, in the next paragraph.

A statement such as "up 2.5 (+/-0.15) cents," appearing in the text, indicates the range (+2.35 to +2.65 cents) in which the actual change is likely to have occurred. The range given for the change is a 90 percent confidence interval that accounts only for sampling variability. If the range had contained zero (0), it would have been uncertain whether there was an increase or decrease; that is, the change would not have been statistically significant. For any comparison cited without a confidence interval, the change is statistically significant.

Transmitted: 7/10/96

Byline: Lafferty (MF Merlin)